NEW YORK STATE THOROUGHBRED BREEDING AND DEVELOPMENT FUND CORPORATION (A Component Unit of the State of New York) FINANCIAL REPORT DECEMBER 31, 2017

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1 (A Component Unit of the State of New York) FINANCIAL REPORT DECEMBER 31, 2017

2 (A Component Unit of the State of New York) TABLE OF CONTENTS PAGE Independent Auditor s Report 1-2 Management s Discussion and Analysis 3-5 Financial Statements: Statements of Net Position 6 Statements of Revenue, Expenses and Changes in Net Position 7 Statements of Cash Flows 8 Notes to Financial Statements 9-25 Required Supplementary Information Schedule of Funding Progress for the Retiree Health Plan 26 Schedules of Proportionate Share of the Net Pension Liability (Asset) 27 Schedules of Fund Contributions 28 Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 29-30

3 INDEPENDENT AUDITOR S REPORT To the Members New York State Thoroughbred Breeding and Development Fund Report on the Financial Statements We have audited the accompanying financial statements of the New York State Thoroughbred Breeding and Development Fund (the Fund), a component unit of the State of New York, as of and for the years ended December 31, 2017 and 2016, and the related notes to the financial statements, which collectively comprise the Fund s basic financial statements as listed in the table of contents. Management s Responsibility Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Fund as of December 31, 2017 and 2016, and the changes in financial position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. 1.

4 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management s discussion and analysis on pages 3 through 5 and the schedule of funding progress for the retiree health plan, schedules of proportionate share of the net pension liability (asset), and the schedules of Fund contributions on pages be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 27, 2018, on our consideration of New York State Thoroughbred Breeding and Development Fund's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the New York State Thoroughbred Breeding and Development Fund s internal control over financial reporting and compliance. Marvin and Company, P.C. Latham, NY March 27,

5 (A Component Unit of the State of New York) Management s Discussion and Analysis December 31, 2017 and 2016 Management of the New York State Thoroughbred Breeding and Development Fund Corporation (the Fund) offers readers of the Fund s financial statements this analysis of the financial activities of the Fund for the years ended December 31, 2017 and Following this Management s Discussion and Analysis (MD&A) are the financial statements of the Fund together with the notes thereto. Please read the MD&A in conjunction with the Fund s financial statements and the accompanying notes in order to obtain a full understanding of the Fund s financial position and results of operations. The Fund was created by an Act of the State of New York (the State), as more fully described in note 1 of the financial statements, and commenced operations in The Fund s mission statement is: To promote by monetary incentives the responsible breeding of quality thoroughbred racehorses in keeping with the founding legislation to preserve New York s irreplaceable farmland. OVERVIEW OF FINANCIAL STATEMENTS This annual financial report consists of two parts: Management s Discussion and Analysis (this section) and the basic financial statements. The Fund follows enterprise fund reporting; therefore, the financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. FINANCIAL ANALYSIS OF THE FUND Net Position Cash and equivalents decreased by $628,236 in 2017 as compared to The decrease is attributed to a decrease in Video Lottery Terminal (VLT) revenues received by the Fund in The decrease in VLT revenues was due in part to a partial reclassification of Resorts World Aqueduct VLTs. The reclassification changed the Fund s commission rate for 460 VLTs from 1.5% to.5% and limited revenues to 2013 levels, adjusted for inflation. The change in classification resulted in a payable to the NY Gaming Commission of $1,179,689, the amount collected by the Fund exceeding adjusted 2013 revenues. The decreases to pension-related accounts are due to changes in the Fund s proportionate share of pension costs as determined by actuarial valuation provided by the NYS and Local Retirement System. By statute, the Fund pays the Harry M. Zweig Memorial Fund of Cornell University 2% of its operating revenues to fund equine research. Due to the decrease in the Fund s 2017 revenues, the amount payable to Cornell University for 2017 is $389,399, a decrease of $44,547 or 10% lower than In accordance with the Racing Pari-mutuel Wagering and Breeding Law enacted by the New York State Legislature in 1973, moneys of the Fund in excess of $75,000 on hand at the end of the calendar year must be paid to the State and to the regional off-track betting corporations. 3.

6 (A Component Unit of the State of New York) Management s Discussion and Analysis December 31, 2017 and 2016 The following table summarizes the Fund s net position for 2017 and 2016: Assets: Cash and equivalents $ 5,393,475 $ 6,021,711 Receivables 1,173,025 1,171,109 Other assets 254, ,374 Operating Activities Total assets $ 6,821,047 $ 7,465,194 Deferred outflows of resources - pensions $ 164,118 $ 282,448 Liabilities: Accounts payable and accrued expenses $ 336,918 $ 238,435 Awards payable 2,150,003 2,060,242 Awards payable reserve, current 1,509,101 1,513,627 Payable to Harry M. Zweig Memorial Fund 389, ,946 Purse enrichments payable 525,492 2,541,699 VLT payable - NY Gaming Commission 1,179,689 - Postemployment benefits 672, ,646 Net pension liability - proportionate share 122, ,871 Total liabilities $ 6,884,992 $ 7,639,466 Deferred inflows of resources - pensions $ 25,173 $ 33,176 Net position $ 75,000 $ 75,000 Under founding statutes, the Fund receives revenue from on-track and off-track thoroughbred handle in New York, and breakage from regional off-track betting wagers. Handle accounted for approximately 30% and 28% of revenue in 2017 and 2016, respectively, while breakage totaled 2% of total operating revenue in both years. The Fund obtained an additional contractual source of revenue from VLTs at Finger Lakes Gaming and Racetrack beginning in 2004, which provided approximately 7% of total operating revenue for both 2017 and Further enhancing Fund revenues, Resorts World Casino New York City began operation of VLTs at Aqueduct Racetrack in late Statutory revenue received from this operation was approximately $10.5 million in 2017 and $12.4 million in 2016, or 54% and 57% of total operating revenue, respectively. Effective January 1, 2014, legislation provided for the Fund to receive additional revenues from Advanced Deposit Wagering (ADW) sources. Total ADW revenue accounted for 5% and 4% of the Fund s total operating revenue in 2017 and 2016, respectively. Total 2017 operating revenues of approximately $19.5 million result in a decrease of $2.2 million from As noted earlier, this decrease is due to a decrease in VLT revenues. Despite the significant decrease to the Fund s revenues, the Fund was able to pay 100% of all breeder, stallion, and owner awards earned in 2017 and to reserve $520,352 for New York-sired purse enrichment. 4.

7 (A Component Unit of the State of New York) Management s Discussion and Analysis December 31, 2017 and 2016 The following table summarizes the Fund s operating income for the years ended December 31, 2017 and 2016: Operating revenue: Handle revenue $ 5,925,135 $ 6,025,242 ADW revenue 929, ,223 Breakage revenue 446, ,013 VLT commission 12,025,220 14,158,259 Other income 143, ,550 Total operating revenue $ 19,469,955 $ 21,647,287 Operating expenses: Awards $ 15,078,741 $ 15,081,119 Purse enrichments 2,124,753 4,150,335 Promotion 1,168,787 1,239,973 Administration 737, ,788 Harry M. Zweig Memorial Fund 389, ,946 Bad debt - Suffolk OTB - - Total operating expenses $ 19,499,044 $ 21,678,161 Operating loss $ (29,089) $ (30,874) Nonoperating revenue - interest income 29,089 30,874 Change in net assets $ - $ - Net postion at beginning of year 75,000 75,000 Prior period adjustment - - Net position at end of year $ 75,000 $ 75,000 CONTACTING THE FUND S FINANCIAL MANAGEMENT This financial report is designed to provide readers with a general overview of the Fund s finances and to demonstrate the Fund s accountability for the revenue that it receives. If you have questions about this report or need additional financial information, contact the Fund at 1 Broadway Center, Suite 601, Schenectady, New York

8 (A Component Unit of the State of New York) STATEMENTS OF NET POSITION ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Current assets: Cash and equivalents $ 5,393,475 $ 6,021,711 Receivables 1,173,025 1,171,109 Prepaid expenses 22,452 34,497 Total current assets 6,588,952 7,227,317 Property and equipment, at cost: Office furniture and equipment 25,106 28,072 Vehicles 43,564 43,564 Software and website 257, ,700 Software - work-in-process - 111, , ,511 Less accumulated depreciation (93,925) (73,634) Net property and equipment 232, ,877 Total assets 6,821,047 7,465,194 Deferred outflow of resources - pension 164, ,448 Total Assets and Deferred Outflow of Resources $ 6,985,165 $ 7,747,642 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Current liabilities: Accounts payable and accrued expenses $ 336,918 $ 238,435 Awards payable 2,150,003 2,060,242 Awards payable reserve 1,509,101 1,513,627 Payable to Harry M. Zweig Memorial Fund 389, ,946 Purse enrichments payable 525,492 2,541,699 VLT payable - NY Gaming Commission 1,179,689 - Total current liabilities 6,090,602 6,786,949 Long-term liabilities: Postemployment benefits payable 672, ,646 Net pension liability - proportionate share 122, ,871 Total liabilities 6,884,992 7,639,466 Deferred inflow of resources - pension 25,173 33,176 Net position: Net investment in capital assets 232, ,877 Restricted - expendable (157,095) (162,877) Total net position 75,000 75,000 Total Liabilities, Deferred Inflows, and Net Position $ 6,985,165 $ 7,747,642 See accompanying notes to financial statements. 6.

9 (A Component Unit of the State of New York) STATEMENTS OF REVENUE, EXPENSES AND CHANGES IN NET POSITION YEARS ENDED Operating revenue: Handle revenue $ 5,925,135 $ 6,025,242 Advance Deposit Wagering revenue 929, ,223 Breakage revenue 446, ,013 VLT commission revenue 12,025,220 14,158,259 Registration and web advertising fees revenue 143, ,550 Total operating revenue 19,469,955 21,647,287 Operating expenses: Breeder awards 10,643,537 10,717,922 Stallion awards 2,615,534 2,658,877 Owner awards 1,819,670 1,704,320 FLRA breakage 104, ,785 Purse enrichment 2,020,352 4,036,550 Promotion 1,168,787 1,239,973 Administration 737, ,788 Harry M. Zweig Memorial Fund 389, ,946 Total operating expenses 19,499,044 21,678,161 Operating income (loss) (29,089) (30,874) Nonoperating revenue - interest income 29,089 30,874 Change in net position - - Net position at beginning of year 75,000 75,000 Net position at end of year $ 75,000 $ 75,000 See accompanying notes to financial statements. 7.

10 (A Component Unit of the State of New York) STATEMENTS OF CASH FLOWS YEARS ENDED Cash flows from operating activities: Receipts from operations $ 19,471,871 $ 21,588,025 Payments for awards and purses (19,134,467) (19,146,280) Payments to Harry M. Zweig Memorial Fund (432,946) (439,108) Payments to employees (388,560) (370,365) Payments to contractors and suppliers (148,580) (1,550,845) Net cash provided by (used in) operating activities (632,682) 81,427 Cash flows from capital and related financing activities - acquisition of property and equipment (24,643) (117,039) Cash flows from investing activities - interest earned 29,089 30,874 Net change in cash and equivalents (628,236) (4,738) Cash and equivalents at beginning of year 6,021,711 6,026,449 Cash and equivalents at end of year $ 5,393,475 $ 6,021,711 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) $ (29,089) $ (30,874) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization expense 30,425 18,647 Amortization of deferred inflows - pension (non-cash) 7,478 5,916 Net change in deferred outflows and inflows related to pensions (non-cash) 102,849 (165,956) Changes in: Receivables (1,916) (59,261) Prepaid expenses 12,045 (19,121) Accounts payable and accrued expenses 98,483 28,408 Awards payable 89,761 (2,410,600) Awards payable reserve (4,526) (39,193) Purse enrichments payable (2,016,207) 2,534,967 VLT payable - NY Gaming Commission 1,179,689 - Harry M. Zweig Memorial Fund payable (43,547) (6,163) Postemployment benefits payable 36,472 42,459 Pension liability (94,599) 182,198 Net cash provided by (used in) operating activities $ (632,682) $ 81,427 See accompanying notes to financial statements. 8.

11 (1) Organization The New York State Thoroughbred Breeding and Development Fund Corporation (the Fund) is a public benefit corporation organized pursuant to Sections 251 through 257 of the Racing, Pari-mutuel Wagering and Breeding Law (the Law) enacted by the New York State Legislature in The Fund is a component unit of the State of New York (the State) and is included in the State s Comprehensive Annual Financial Report of the Comptroller as a public benefit corporation. (2) Summary of Significant Accounting Policies (a) Basis of Presentation The financial statements of the Fund have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standards setting body for establishing governmental accounting and financial reporting principles. For the year ended December 31, 2017, the Fund adopted: GASB Statement No Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. This Statement, issued in June 2015, replaces existing standards of accounting and financial reporting for postemployment benefit plans other than pension plans and also replaces existing requirements for defined contribution OPEB plans. The provisions of this Statement are effective for financial statements for fiscal years beginning after June 15, 2016, which is the fiscal year beginning January 1, 2017 for the Fund. This Statement had no material effect on the financial statements of the Fund. GASB Statement No "Blending Requirements for Certain Component Units - an Amendment of GASB Statement No. 14." This Statement, issued in January 2016, amends the blending requirements for the financial statement presentation of component units of all state and local governments. It requires blending of a component unit incorporated as a notfor-profit corporation in which the primary government is the sole corporate member. The provisions of this Statement are effective for financial statements for years beginning after June 15, 2016, which is the fiscal year beginning January 1, 2017 for the Fund. This Statement had no material effect on the financial statements of the Fund. GASB Statement No Irrevocable Split-Interest Agreements. This Statement, issued in March 2016, improves accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The provisions of this Statement are effective for financial statements for fiscal years beginning after December 15, 2016, which is the fiscal year beginning January 1, 2017 for the Fund. This Statement had no material effect on the financial statements of the Fund. 9.

12 (2) Summary of Significant Accounting Policies (a) Basis of Presentation GASB Statement No. 82 Pension Issues an amendment of GASB Statements No. 67, No. 68, and No. 73. This Statement, issued in March 2016, addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The provisions of this Statement are effective for financial statements for fiscal years beginning after June 15, 2016, which is the fiscal year beginning January 1, 2017 for the Fund, except for the requirements of paragraph 7 in a circumstance in which an employer s pension liability is measured as of a date other than the employer s most recent fiscal year-end. In that circumstance, the requirements of paragraph 7 are effective for that employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017, which is the fiscal year beginning January 1, 2018 for the Fund. This Statement had no material effect on the financial statements of the Fund. (b) Assets, Liabilities and Net Position Receivables consist of handle, breakage, a percentage of Advanced Deposit Wagering (ADW), and a percentage of Video Lottery Terminal (VLT) revenue amounts which are reported at their outstanding unpaid principal balances. The Fund records revenues receivable at estimated fair value, net of an allowance based upon the estimated collectability. The allowance was $130,275 for both 2017 and Retirement Plan - The Fund provides retirement benefits for its employees through contributions to the New York State Employees Retirement System. The System provides various plans and options, some of which require employee contributions. Note 8 provides more information on the retirement plan. The Fund expenses advertising and promotion costs as incurred. Advertising costs for the years ended December 31, 2017 and 2016 amounted to $296,576 and $359,787, respectively. Promotion costs for the years ended December 31, 2017 and 2016 were $872,211 and $880,186, respectively. Other areas of assets, liabilities and net positon are addressed throughout these footnotes. 10.

13 (c) Deferred Outflows and Inflows of Resources In the Statement of Net Position, in addition to assets, the Fund will sometimes report a separate section of deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Fund has two items that qualify for reporting in this category. The first item is related to pensions reported in the Statement of Net Position. This represents the effect of the net change in the Fund s proportion of the collective net pension asset or liability and difference during the measurement period between the Fund s contributions and its proportionate share of total contributions to the pension systems not included in pension expense. The second item is the Fund contributions to the New York State and Local Employees Retirement System (the System) subsequent to the March 31 measurement date. In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. Deferred inflows of resources represent the net effect of the change in the Fund's proportion of the collective net pension liability related to its participation in the System and differences between the Fund's contributions and its proportionate share of total contributions to the System not included in pension expense. (d) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, deferred inflows of resources and disclosures at the date of these financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 11.

14 (2) Summary of Significant Accounting Policies (e) Property, Equipment and Depreciation Property and equipment are reported at cost. Purchases and improvements over $1,000 are capitalized. Maintenance and repairs are expensed as incurred. For assets placed in service, depreciation and amortization is calculated over estimated useful lives of between 3-10 years using the straight-line method. (f) Subsequent Events The Fund has evaluated subsequent events through the date of the auditor s report which is the date the financial statements were available to be issued. There were no subsequent events requiring recording or disclosure. (3) Cash and Equivalents and Investments The Fund s investment policies are governed by New York State Statute. Fund monies must be deposited in FDIC-insured commercial banks or trust companies located within the State. The Fund is authorized to use demand accounts, certificates of deposit and short-term U.S. Treasury bills or notes. Collateral is required for demand deposits and certificates of deposit in an amount equal to or greater than the amount of all deposits not covered by federal deposit insurance. Obligations that may be pledged as collateral are outlined in chapter 623 of the laws of the State of New York. Custodial Credit Risk - This is the risk that in the event of a bank failure, the Fund s deposits may not be returned to it. As noted above, by State statute, all deposits in excess of FDIC insurance coverage must be collateralized. As of December 31, 2017 and 2016, all uninsured bank deposits were fully collateralized with securities held by the pledging financial institution s trust department or agent as part of the collateral used to secure all the institution s deposits from the State of New York. (4) Receipt and Distribution of Revenue and Basis of Net Position New York State Racing, Pari-Mutuel Wagering and Breeding law (the Law), Section 254, provides for Fund revenues from New York on-track and off-track thoroughbred handle and breakage from regional off-track betting wagers as well as from Video Lottery Terminal (VLT) gaming devices at Finger Lakes Gaming and Racetrack, and Resort World Casino- New York City. 12.

15 (4) Receipt and Distribution of Revenue and Basis of Net Position Handle: Handle of one-half of one percent (.5%) of the regular, multiple, exotic and super exotic wagers are paid to the Fund. The Fund receives an additional two-tenths of 1% (.2%) of live racing handle only at New York Racing Association (NYRA) tracks. However, under Section 905(4) of the Law, when out-of-state track retention rates vary from New York State retention rates, entities are entitled to pro-rate the difference. This reduces the overall handle received by the Fund to less than.5%. Special Event races, which include the Kentucky Derby, the Preakness and the Breeder s Cup, generate handle of one-half of one percent (.5%), as specified in Section 904 of the Law, with NYRA paying an additional.2%. Breakage: Twenty percent of New York State off-track betting breakage from bets on harness races and fifty percent on all other races is paid to the Fund and to the Agriculture and New York State Horse Breeding Development Fund; the Fund receives one half of such payments. VLT Finger Lakes Gaming and Racetrack: The Fund receives revenue from VLT devices at Finger Lakes Gaming and Racetrack under statute at 1.25% of Net Win. VLT Resort World Casino New York City: In 2011, the Fund began to receive VLT device revenue from Resorts World Casino - New York City (RW) at the Aqueduct Racetrack at the rate of 1% of Net Win. The rate increased to 1.25% in October of 2012, and to 1.5% in October On October 15, 2016, RW entered into an agreement with Nassau OTB to host up to 1,000 VLT devices. Machines designating by RW to Nassau OTB will pay the Fund a reduced rate of.5% of Net Win. There were 460 VLT machines designated to Nassau OTB at both December 31, 2017 and VLT Nassau OTB and Suffolk OTB: The Fund receives.5% of VLT revenues from Nassau OTB and Suffolk OTB under New York State Tax Code, Section Amounts collected by the Fund in excess of the amount necessary to maintain payments from VLTs at RW at the same level realized in 2013, adjusted by the Consumer Price Index, must be returned to the New York Gaming Commission. The Fund recognized revenues of $149,858 and $150,371 and payables to the New York Gaming Commission of $1,179,689 and $-0- at December 31, 2017and 2016, respectively. ADW: Effective January 1, 2014, New York State Racing, Pari-Mutuel Wagering and Breeding law, Section 115-b, provides for Fund revenues generated from out of state ADW handle from New York State residents. Moneys received by the Fund are disposed and distributed, and the Fund s net position is maintained, in accordance with the Law, Section 254. The Fund is authorized to dispose and distribute the moneys received by it for the following purposes and no other: 13.

16 (4) Receipt and Distribution of Revenue and Basis of Net Position Awards: An amount as determined by the Fund but not in excess of: (a) 43% as awards to breeders of New York-breds finishing first, second, third and fourth in races, (b) 33% as awards to owners of New York-breds finishing first, second, third and fourth in open races, (c) 15% as awards to stallion owners, whose New York stallions have sired New York-breds finishing first, second, third and fourth in races. However, the Fund, with two-thirds vote of its Board of Directors, may increase these awards up to but not in excess of (a) 65% as awards to breeders, (b) 40% as awards to owners and (c) 20% as awards to stallion owners. On August 16, 2008 the Board approved a motion to limit the distribution of monies to first, second and third place finishing New York-breds effective September 1, Purse: An amount as determined by the Fund but not in excess of 44% to provide purse moneys for races exclusively for New York-breds entered in all races, the conditions of which have been approved by the Fund. In addition, 75% of in-state breakage revenue is to be provided to Finger Lakes Gaming and Racetrack for purse enrichment. Promotion: Up to 6% to advance and promote breeding and raising of thoroughbreds in New York. This cap will be decreased to 5% as of October 28, Administration: Up to 5% for the administration and management of the Fund. This cap will be decreased to 4% as of October 28, Equine research: An amount equal to 2% thereof for the promotion of equine research. At the end of any calendar year, any Fund net position on hand in excess of $75,000 shall be remitted to and vested in the State or the contributing Off-Track Betting Corporations. Distribution of awards and purses is as follows: Breeder awards $ 10,643,537 $ 10,717,922 Stallion awards 2,615,534 2,658,877 Owner awards 1,819,670 1,704,320 FLRA breakage 104, ,785 Purse enrichment 2,020,352 4,036,550 $ 17,203,494 $ 19,231,454 The awards payable reserve represents the retention of 10% of awards due as established in accordance with Fund policy. The reserve at December 31, 2017 was paid out in January

17 (5) Investment Policy NEW YORK STATE THOROUGHBRED BREEDING The Fund s investment policy requires that all funds available for investment be deposited in interest-bearing accounts or fully secured certificates of deposit with New York State banks for the shortest possible terms and at the highest available interest rates, or in United States Treasury short-term bills or notes at the highest available rate. As of December 31, 2017 and 2016, the Fund maintained available funds in interest bearing checking accounts, since the rate of return was comparable to short-term Treasury bills. (6) Property and Equipment Balance Balance 1/1/2017 Additions Deletions 12/31/2017 Office furniture and equipment $ 28,072 $ 7,168 $ 10,134 $ 25,106 Vehicles 43, ,564 Software and website 128, , , , ,818 10, ,020 Software work-in-process 111,175 17, ,650 - Total 311, , , ,020 Less accumulated depreciation/amortization 73,634 30,709 10,418 93,925 Net property and equipment $ 237,877 $ 122,584 $ 128,366 $ 232,095 Balance Balance 1/1/2016 Additions Deletions 12/31/2016 Office furniture and equipment $ 37,294 $ 1,064 $ 10,286 $ 28,072 Vehicles 43, ,564 Software and website - 128, ,700 80, ,764 10, ,336 Software - work-in-process 123, , , ,175 Total 204, , , ,511 Less accumulated depreciation/amortization 65,274 18,646 10,286 73,634 Net property and equipment $139,484 $ 217,593 $ 119,200 $ 237,

18 (7) Harry M. Zweig Memorial Fund By law, 2% of operating revenue accruing to the Fund is to be used for the promotion of equine research through a fund of a land grant university within New York State. The Harry M. Zweig Memorial Fund of Cornell University was established for this purpose. (8) Pension Plan (a) Plan Descriptions and Benefits Provided The Fund participates in the New York State and Local Employees Retirement System (the System). This is a cost-sharing multiple-employer retirement system. The System provides retirement benefits as well as death and disability benefits. The net position of the System is held in the New York State Common Retirement Fund (NYSCRF), which was established to hold all net assets and record changes in plan net position allocated to the System. The Comptroller of the State of New York serves as the trustee of the NYSCRF and is the administrative head of the System. Benefits are established under the provision of the New York State Retirement and Social Security Law (RSSL). Once a public employer elects to participate in the System, the election is irrevocable. The New York State Constitution provides that pension membership is a contractual relationship and plan benefits cannot be diminished or impaired. Benefits can be changed for future members only by enactment of a State statute. The Fund also participates in the Public Employees Group Life Insurance Plan (GLIP), which provides death benefits in the form of life insurance. The System is included in the State s financial report as a pension trust fund. That report, including information with regard to benefits provided, may be found at or obtained by writing to the New York State and Local Retirement System, 110 State Street, Albany, New York The System is noncontributory except for employees who joined after July 27, 1976, who contribute 3 percent of their salary for the first ten years of membership, and employees who joined on or after January 1, 2010 and before April 1, 2012 who generally contribute 3.0 to 3.5 percent of their salary for their entire length of service. For employees joining on or after April 1, 2012, employee contribution rates under System tier VI vary based on a sliding salary scale. The Comptroller annually certifies the actuarially determined rates expressly used in computing the employers' contributions based on salaries paid during the System's fiscal year ending March 31. Contributions for the current year and two preceding years were equal to 100 percent of the contributions required, and were as follows: ERS 2017 $ 61, , ,

19 (8) Pension Plan (b) Pension Liabilities. Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At December 31, 2017, the Fund reported the following liability for its proportionate share of the net pension liability for the System. The net pension liability was measured as of March 31, The total pension liability used to calculate the net pension liability was determined by an actuarial valuation. The Fund s proportionate share of the net pension liability was based on a projection of the Fund s long-term share of contributions to the System relative to the projected contributions of all participating members, actuarially determined. This information was provided by the System in reports provided to the Fund. Date 3/31/2017 3/31/2016 Net pension liability $ 122,272 $ 216,871 Fund s proportion of the Plan s net pension liability % % At December 31, 2017 and 2016 the Fund s reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Deferred Inflows of Outflows of Resources Resources Deferred Inflows of Resources Differences between expected and actual experience $ 3,064 $ 18,568 $ 1,096 $ 25,706 Change in assumptions 41,773-57,833 - Net difference between projected and actual earnings on pension plan investments 24, ,660 - Changes in proportion and differences between the Fund s contributions and proportionate share of contributions 33,088 6,605 33,625 7,470 Fund s contributions subsequent to the measurement date 61,770-61,234 - Total $ 164,118 $ 25,173 $ 282,448 $ 33,

20 (8) Pension Plan Fund contributions subsequent to the March 31 measurement date will be recognized as a reduction of the net pension liability in the subsequent year. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended (c) Actuarial Assumptions ERS 2018 $ 30, , , (14,857) The total pension liability as of the March 31 measurement date was determined by using an actuarial valuation as noted in the table below, with update procedures used to roll forward the total pension liability to the measurement date. The actuarial valuations used the following actuarial assumptions: Significant actuarial assumptions used in the valuations were as follows: Measurement date March 31, 2017 March 31, 2016 Actuarial valuation date April 1, 2016 April 1, 2015 Investment return 7.0% 7.0% Salary scale 3.8% Average 3.8% Average Decrement tables April 1, April 1, March 31, 2015 March 31, 2015 ERS s Experience ERS s Experience Inflation rate 2.5% 2.5% Annuitant mortality rates are based on April 1, March 31, 2015 System s experience with adjustments for mortality improvements based on the Society of Actuaries Scale MP-2014 for the March 31, 2017 and March 31, 2016 measurement dates. The long-term expected rate of return on pension plan investments was determined using a building block method in which best estimate ranges of expected future real rates of return (expected returns net of investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by each the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: 18.

21 (8) Pension Plan Long-term Expected Real Rate of Return Target Allocation Measurement date Asset type: Domestic equity 4.55% 7.30% 36% 38% International equity 6.35% 8.55% 14% 13% Private equity 7.75% 11.00% 10% 8% Real estate 5.80% 8.25% 10% 10% Absolute return strategies (1) 4.00% 6.75% 2% 3% Opportunistic portfolio 5.89% 8.60% 3% 3% Real assets 5.54% 8.65% 3% 3% Bonds and mortgages 1.31% 4.00% 17% 18% Cash (0.25%) 2.25% 1% 2% Inflation - indexed bonds 1.50% 4.00% 4% 2% Total 100% 100% The real rate of return is net of the long-term inflation assumption of 2.50% (1) Excludes equity-oriented and long-only funds. For investment management purposes, these funds are included in domestic equity and international equity, respectively. (d) Discount Rate The discount rate used to measure the total pension liability was 7.0% for the measurement dates ended March 31, 2017 and The projection of cash flows used to determine the discount rate assumes that contributions from plan members will be made at the current contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based upon the assumptions, the System s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore the long term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. (e) Sensitivity of the Proportionate Share of the Net Pension Liability to the Discount Rate Assumption The following presents the Fund s proportionate share of the net pension liability calculated using the discount rate of 7.0% for both 2017 and 2016, as well as what the Fund s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.0%) or 1-percentage point higher (8.0%) than the current rate: 19.

22 (8) Pension Plan 1% Current 1% Decrease Assumption Increase December 31, 2017 (6.0%) (7.0%) (8.0%) Employer s proportionate share of the net pension asset (liability) $ (390,512) $(122,272) $104,525 December 31, 2016 Employer s proportionate share of the net pension asset (liability) $ (489,029) $ (216,871) $ 13,090 Changes of Assumptions Changes of assumptions about future economic or demographic factors or other inputs are amortized over a closed period equal to the average of the expected service lives of all employees that are provided with pension benefits. Collective Pension Expense Collective pension expense includes certain current period changes in the collective net pension asset/(liability), projected earnings of pension plan investments, and the amortization of deferred outflows of resources and deferred inflows of resources for the current period. The collective pension expense for 2017 and 2016 is $77,498 and $83,393, respectively. (f) Pension Plan Fiduciary Net Position The components of the current-year net pension asset/(liability) of all the participation System employers as of the March 31, 2017 and 2016 valuation dates, were as follows: (Dollars in Millions) Valuation date 3/31/2017 3/31/2016 Employers total pension liability $(177,400) $(172,304) Plan net position 168, ,253 Employers net pension asset/(liability) $ (9,396) $ (16,050) Ratio of plan net position to the Employers total pension asset/(liability) 94.7% 90.7% (g) Contributions to the Pension Plan Employer contributions are paid annually based on the System s fiscal year which ends on March 31 st. Retirement contributions as of December 31, 2017 and 2016 represent the projected employer contribution for the period of April 1, 2017 through March 31, 2018 and April 1, 2016 through March 31, 2017, respectively based on paid System wages multiplied by the employer s contribution rate, by tier. These amounts have been recorded as deferred outflows of resources in the accompanying financial statements. 20.

23 (9) Postemployment Benefits Other Than Pensions In addition to providing retirement benefits, the Fund provides continuation of medical coverage for employees that retire no earlier than age 62 or have at least twenty years of credited State service or are vested in the retirement system plan with ten years of credited service. The Fund will also provide coverage in the event of early retirement if the employee qualifies for a State disability pension. The Fund contributes 75% of costs for an individual policy and 35% of the difference between the cost of family and individual coverage. Surviving spouses of retired employees with at least ten years of service are also eligible for continued health insurance coverage subject to a 25% co-pay. The Fund reimburses retirees and their spouses for Medicare Part B premium costs. The Fund has implemented the accounting and disclosure requirements of GASB Statement No Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions effective for its fiscal year beginning January 1, The schedule of funding progress on page 26 presents multiyear trend information that is useful in determining whether the actuarial value of plan assets is increasing or decreasing over time relative to the accrued actuarial liability. The projections of benefits are based upon the types of benefits provided under the substantive plan at the valuation date. The actuarial calculations reflect a long-term perspective: actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The number of participants as of January 1, 2017 and 2016 was as follows: Active employees 5 5 Retired employees 5 5 Spouses covered 2 2 Total Funding Policy - The Fund currently pays for postemployment health care benefits on a pay-asyou-go basis. These financial statements assume that pay-as-you-go funding will continue. Annual OPEB Cost at December 31, 2017 and 2016 and Normal cost $ 35,277 $ 37,811 $ 32,781 Interest Total normal cost 35,391 37,933 32,890 Amortization of unfunded actuarial accrued liability 42,235 42,932 45,700 Annual required contribution 77,626 80,865 78,590 Interest on net OPEB obligation 25,426 23,727 19,655 Adjustment to annual required contribution (27,458) (25,624) (28,417) Total annual OPEB cost $ 75,594 $ 78,968 $ 69,

24 (9) Postemployment Benefits Other Than Pensions Reconciliation of net OPEB obligation at December and 2016 and Net OPEB obligation at beginning of year $635,646 $593,187 $557,988 Annual OPEB cost 75,594 78,968 69,828 Contributions (39,122) (36,509) (34,629) Total net OPEB obligation $672,118 $635,646 $593,187 Percentage of Annual OPEB Cost Contributed 51.75% 46.23% 49.59% Funded Status Actuarial Accrued Liability as of Beginning of year $ 991,726 $ 1,008,113 $ 819,118 Plan Assets, end of year Unfunded Actuarial Accrued Liability $ 991,726 $ 1,008,113 $ 819,118 Percentage of Funded Accrued Liability 0% 0% 0% Actuarial methods and assumptions - The valuation of the postemployment healthcare benefit obligation involves estimates and assumptions about the probability of events occurring far into the future. Examples are assumptions about future employment, mortality, and the health care cost trend. Calculations are based on the types of benefits provided under the terms of the substantive plan at the time of valuation and on the pattern of cost sharing between the Fund and plan participants. Calculations reflect a long-term perspective, so methods and assumptions used include techniques that are designed to reduce short-term volatility. The method used is the Entry Age Normal Method. Projections assume a closed group population (i.e. no new hires), pay-as-you-go contributions and a 4% annual rate of return for both 2017 and Also, projections assume that 100% of future contingent eligible participants will receive the healthcare benefits at their full eligibility age, or current age if later. The amortization cost for the initial unfunded actuarial liability is a level dollar amount for a period of 30 years. Some of the more significant assumptions used in the calculation are as follows: Funding interest rate 4.0% 4.0% Initial Medical Trend rate 5.5% 5.2% Ultimate Medical Trend rate 3.8% 3.8% 22.

25 (10) Concentration of Risk - Long-Term Receivable and Payable In 2011, Suffolk OTB sought protection from its creditors with the filing of a petition for bankruptcy in the Eastern District of New York under Chapter Nine of the U.S. Bankruptcy Code. In October 2014, the Suffolk OTB received court approval on a plan of repayment. The repayment is contingent on several factors and the date repayment will begin remains uncertain. Under the terms of the original filing, Suffolk OTB was able to delay payment on debts owed as of the filing date while continuing to make payments on all debts incurred from that date forward. Amounts due and owing to the Fund from the OTB at the time of the filing included Handle and Breakage totaling $56,243 and $74,031 for 2012 and 2011, respectively. Although protected by Schedule F - Creditors Holding Unsecured Nonpriority Claims in the 2012 filing, the Fund fully allowed for the non-collectability of these amounts in its 2012 financial statements. Suffolk OTB accounted for $415,982 and $424,236 or approximately 2.1% and 2% of the total operating revenue reported by the Fund for the years ended December 31, 2017 and 2016, respectively. (11) Contingencies Beginning February 1, 2013, the Fund came under the umbrella of the new Gaming Commission of the State of New York. It is anticipated that this reorganization will not significantly impact the Fund s mission or revenue sources. In response, the Fund relocated its operations to the New York State Gaming Commission building in Schenectady, New York, during December The Fund has a Shared Services Agreement with the New York State Gaming Commission for office space, utilities, and use of Gaming Commission employees. The agreement has a ten year term that expires December 31, 2023, but may be terminated by either party with sixty days advance written notice. Occupancy expenditures for the years ended December 31, 2017 and 2016 were $19,261 and $28,560, respectively. Future payments under this agreement are estimated as follows: 2018 $ 18, , , ,875 Thereafter 41,075 $118,

26 (12) Legal Proceedings and Claims In the ordinary course of business, the Fund may be subject to certain legal proceedings and claims. For any actions that are not otherwise covered by liability insurance, management believes that the resulting outcome of any such actions will not have a material adverse effect on the financial condition or results of operations of the Fund. In addition, when a loss contingency becomes probable, management establishes reserves. (13) Accounting Standards Issued But Not Yet Implemented GASB Statement No Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This Statement, issued in June 2016, establishes new accounting and financial reporting requirements for governments whose employees are provided with OPEB, as well as for certain non-employer governments that have a legal obligation to provide financial support for OPEB provided to the employees of other entities. This Statement is effective for fiscal years beginning after June 15, 2017, which is the fiscal year beginning January 1, 2018 for the Fund. The effects of this Statement on the financial statements of the Fund are not presently determinable. GASB Statement No. 83 Certain Asset Retirement Obligations. This Statement, issued in November 2016, addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. The provisions of this Statement are effective for financial statements for fiscal years beginning after June 15, 2018, which is the fiscal year beginning January 1, 2019 for the Fund. The effects of this Statement on the financial statements of the Fund are not presently determinable. GASB Statement No. 84 Fiduciary Activities. This Statement, issued in January 2017, is to provide guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. The provisions of this Statement are effective for financial statements for fiscal years beginning after December 15, 2018, which is the fiscal year beginning January 1, 2019 for the Fund. The effects of this Statement on the financial statements of the Fund are not presently determinable. GASB Statement No. 85 Omnibus This statement address practice issues that have been identified during implementation and application of certain GASB statements (including blending component units, goodwill, fair value measurement and application, other post employment benefits). The provisions of this statements are effective for financial statements reporting period beginning after June 15, 2017, which is the fiscal year beginning January 1, 2018 for the Fund. The effects of this Statement on the financial statements of the Fund are not presently determinable. 24.

27 (13) Accounting Standards Issued But Not Yet Implemented GASB Statement No. 86 Certain Debt Extinguishment Issues. The objective is to improve consistency for in-substance defeasance of debt when cash and other monetary assets acquired with only existing resources (resources other than proceeds) are placed in an irrevocable trust for the sole purpose of debt extinguishment. Also improves prepaid insurance on debt that is extinguished and notes to the FS for the in-substance defeased debt. The provisions of this statements are effective for financial statements reporting period beginning after June 15, 2017, which is the fiscal year beginning January 1, 2018 for the Fund. The effects of this Statement on the financial statements of the Fund are not presently determinable. GASB Statement No. 87 Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving the accounting and financial reporting for leases by governments. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments leasing activities. The provisions of this statements are effective for financial statements reporting period beginning after December 15, 2018, which is the fiscal year beginning January 1, 2019 for the Fund. The effects of this Statement on the financial statements of the Fund are not presently determinable. 25.

28 (A Component Unit of the State of New York) REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS FOR THE RETIREE HEALTH PLAN FOR THE YEAR ENDED DECEMBER 31, 2017 UAAL as a Actuarial Actuarial Accrued Percentage of Actuarial Value of Liability (AAL) - Unfunded AAL Funded Covered Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 12/1/2017 $ - $ 991,726 $ 991,726 0% $ 440, % 12/1/2016-1,008,113 1,008,113 0% 427, % 11/30/ , ,118 0% 346, % 26.

29 (A Component Unit of the State of New York) SCHEDULES OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY (ASSET) LAST 10 FISCAL YEARS FOR THE YEAR ENDED DECEMBER 31, 2017 * Fund's proportion of the net pension liability (asset) % % % Fund's proportionate share of the net pension liability (asset) $ 122,272 $ 216,871 $ 34,673 Fund's covered payroll $ 430,449 $ 426,747 $ 413,358 Fund's proportionate share of the net pension liability (asset) as a percentage of its covered - employee payroll 28.41% 50.82% 8.39% Plan fiduciary net position as a percentage of the total pension liability 94.7% 90.7% 97.9% The amounts presented for each fiscal year were determined as of the March 31, 2017, 2016, and 2015 measurement dates of the plan. Note: This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled this presentation will only include information for those years for which information is available. 27.

30 (A Component Unit of the State of New York) SCHEDULES OF FUND CONTRIBUTIONS LAST 10 FISCAL YEARS FOR THE YEAR ENDED DECEMBER 31, Contractually required contribution $ 61,770 $ 61,234 $ 92,060 $ 37,768 $ 48,034 Contributions in relation to the contractually required contribution 61,770 61,234 92,060 37,768 48,034 Contribution deficiency (excess) $ - $ - $ - $ - $ - Fund's covered employee payroll $ 430,449 $ 426,747 $ 413,358 $ 312,882 $ 364,265 Contributions as a percentage of covered employee payroll 14.35% 14.35% 22.27% 12.07% 13.19% Note: This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled this presentation will only include information for those years for which information is available. 28.

31 INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Members New York State Thoroughbred Breeding and Development Fund We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the New York State Thoroughbred Breeding and Development Fund (the Fund), a component unit of the State of New York, as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise the Fund s basic financial statements, and have issued our report thereon dated March 27, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Fund s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. Accordingly, we do not express an opinion on the effectiveness of the Fund s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 29.